The International Monetary Fund (IMF) and the World Bank (WB) warned on Monday of the looming global recession, which could be worse than the last one, and called for global unity and solidarity in a telephone meeting of the G20 finance ministers held this Monday.
The IMF Managing Director, Kristalina Georgieva, highlighted at the meeting the huge capital flight that has been registered in the emerging markets due to the coronavirus crisis, and indicated that if the human costs of the coronavirus pandemic are already “immeasurable” The looming global recession “will at least be as bad, or worse, than the global financial crisis” that erupted in 2008.
“All countries need to work together to protect people and limit economic damage. The main theme of today’s meeting of the G20 finance ministers and central bank governors was that this is a time for solidarity,” said the IMF’s highest authority.
After anticipating that the recession of the world economy will be “important”, the president of the World Bank, David Malpass, called for a moratorium on the payment of the official debt of the poorest and most vulnerable countries, and said that the priority now is “to provide an answer fast “and implement reforms that help shorten recovery time and” build confidence that recovery can be strong. “
“Countries must move quickly to boost health spending, strengthen social safety nets, support the private sector and counteract disruption in the financial market,” said Malpass.
Both Georgieva and Malpass predicted a recovery by 2021, but “to get there, it is essential to prioritize containment and strengthen health systems, everywhere,” said the IMF managing director, while stressing that “the faster it becomes stop the virus, the faster and stronger the recovery will be. “
Regarding the economic response, Georgieva praised the “extraordinary fiscal measures” adopted by many countries to boost health systems and protect both workers and companies, as well as the decisions of the main central banks to inject liquidity into the system, But he anticipated that “even more will be needed, especially on the fiscal front.”
The IMF Managing Director recalled that while advanced economies are often more prepared to respond to the crisis, many emerging markets and low-income countries face “significant challenges”, affected by “outward capital flows and the deterioration of internal activity “, and put in 83,000 million dollars what investors have withdrawn from emerging markets since the beginning of the crisis.
This is the “largest capital outflow ever recorded. We are particularly concerned about low-income countries with debt problems,” said Georgieva, who said they are already working with the World Bank to deal with this situation.
The head of the IMF promised to “greatly increase emergency financing” to countries that have requested support from the institution, which assured that they already number 80, and recalled that the organization is prepared to use all its lending capacity, valued at 1 trillion dollars.
Malpass recalled that a week ago the WB management approved a package of 14,000 million to respond to the COVID-19 crisis, of which 8,000 million have been set aside for financial support for private companies and the remaining 6,000 million will go to the support of short-term medical care.
He stressed that the poorest and most vulnerable countries will probably be the most affected by the crisis, and assured that the financing obtained from the International Development Association (IDA), the WB’s international development arm, “must be paid to the creditors. “
“I urge all official bilateral creditors in the poorest countries to act with immediate effect to help IDA countries through debt relief, allowing them to focus their resources on fighting the pandemic,” said Malpass, who assured that in many cases this will require a total restructuring of the debt that includes deductions that allow its sustainability.
“I ask the G20 leaders to allow the poorest countries to suspend all official bilateral debt payments until the World Bank and IMF have fully evaluated their reconstruction and financing needs,” he said.